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Chapter 14: Inflation: An Overview ? -The economic costs of inflation -How inflation creates winners and losers -Why policy makers try to maintain a stable rate of inflation -The difference between real and nominal values of income, wages, and interest rates -The problems of deflation and disinflation ? Inflation: Most common complaint: an increase in the price level makes everyone poorer- does not make everyone poorer Real Wage: the wage rate divided by the price level Real income: income divided by the price level Inflation Rate: the percent change per year in a price index?typically the consumer price index the percent increase in the overall level of prices per year ? ? The level of prices doesn?t matter Reducing prices = Reducing income

Chapter 12: The Meaning and Calculation of Unemployment ? -How unemployment is measured -How the unemployment rate is calculated -The significance of the unemployment rate for the economy -The relationship between the unemployment rate and economic growth ? Employed: people who currently hold a job in the economy, either full time or part time/ only if you have a job Unemployed: people who are actively looking for work but aren?t currently employed Limitations: Retired people Disabled Hasn?t actively searched for a Job in the last 4 weeks Discouraged workers Marginally attached workers Underemployed U.S. Census Bureau monthly survey called the Current Population Survey: interviewing a random sample of 60,000 American families

?? Chapter 10: The Circular Flow and Gross Domestic Product ? National income and product accounts/National accounts: keep track of the flows of money between different sectors of the economy/ keep track of the spending of consumers, sales of producers, business investment spending, government purchases, and a variety of other flows of money among different sectors of the economy The Simple Circular Flow Diagram: Simple economic diagram with households and firms, omits a number of real-world complications in the interest of simplicity Household: consists of either an individual or a group of people who share their income Firm: is an organization that produces goods and services for sale and employs members of households

?? Chapter 7: Supply and Demand: Changes in Equilibrium ? substitutes: if the price of good1 rises, the demand for good2 will increase if the price of good1 falls, the demand for good2 will decrease An increase in demand leads to a rise in both the equilibrium price and the equilibrium quantity. A decrease in demand leads to a fall in both the equilibrium price and the equilibrium quantity. Increase in demand: rightward shift of the demand curve market is no longer in equilibrium shortage: quantity demanded exceeds quantity supplied price rises increase in the quantity supplied upward movement along the supply curve new equilibrium When demand for a good or service increases, the equilibrium price and the equilibrium quantity of the

?? Chapter 4: Comparative Advantage and Trade Trade: people divide tasks among themselves and each person provides a good or service that other people want in return for different goods and services wanted Gains from Trade: dividing tasks allows for more people to get more of what they want Specialization: When gains from trade are caused by division of tasks Adam Smith?s (1776) The Wealth of Nations: 18th century pin factory where each person specializes in the production of one thing Production Possibilities: curve model is particularly useful for illustrating gains from trade based on comparative advantage Most important insights in all of economics is that there are gains from trade even if one of the trading parties isn?t especially good at anything